The authority sought reimbursement for a survey that assessed property damage after the 2008 hurricane, but FEMA said it did not ask for, need or want the information.

Word of the denial came as the authority's new leadership is working to make sense of its finances in the wake of a shake-up that has seen its CEO, board chairman and vice chairman replaced in the past month. On Wednesday, interim CEO Tom McCasland recommended the authority delay paying $137,000 in severance the board voted last week to give former CEO Guy Rankin IV because it does not have the cash to pay it.

FEMA's letter is dated Jan. 17, but apparently was not received by HCHA until Tuesday, the same day staffers from the U.S. Department of Housing and Urban Development - which provides a majority of HCHA's funding - arrived to review its finances and management.

HUD's people arrived after a series of Houston Chronicle stories showed authority executives' salaries rose sharply under Rankin, that the agency poured millions into a defunct development, spent lavishly on questionable items, and hired friends and relatives of employees.

Emmett also doubtful

FEMA was blunt in rejecting the request for reimbursement under the Disaster Housing Assistance Program.

"Simply put, the scope of work, the associated activities, and final product from this effort, were not a requirement of, or a benefit to, the program," the letter stated. "Furthermore, we have no record of having requested this survey in support of the DHAP program."

Harris County Judge Ed Emmett also raised doubts about the damage survey, noting that it estimated half the homes in the county had been damaged by the storm.

"I could look around my neighborhood and see how many homes were damaged and it wasn't anywhere near half," Emmett said. "I questioned how it was done and I didn't get real good answers, and then they tried to give the bill to our Office of Emergency Management. We immediately said, 'No, we didn't ask you to do it. We can't pay you for that.' I think FEMA had the same reaction."

Precinct 4 Commissioner Jack Cagle said the reimbursement rejection was not entirely surprising in light of recent revelations about the authority's spending.

"It's an awkward time when this agency is under siege with many questions about how it's doing its business to say, 'Oops,' over a lost $7 million," he said. "The silver lining is that we are clearly going to have some new direction and some new financial policies that will come into place to make sure there's greater transparency and accountability for all the funds that come through that entity."

'Putting a plan in place'

Newly installed board Chairman Beto Cardenas said the authority's financial troubles and unclear bookkeeping appear to have cropped up largely during the current fiscal year, which ends Saturday.

"From our initial review, the current budget woes appear to be caused by construction project overruns and high consulting fees," McCasland said. "With the talented and hard-working HCHA team, we are putting a plan in place that will ensure that our expenses are in line with our revenues."

In a series of letters between November and late January, the agency also learned it owes HUD $3.8 million due to over-funding of monies it had been advanced to administer the DHAP program.

"We are working to determine whether all line items noted in our statements, including receivables, as presented to the board, are in fact legitimate sources of revenue," Cardenas said.

Selling TVs, most cars

The agency has been criticized for its spending on statues, trophies, grand-opening parties and $312,000 on vehicles, including $44,140 on a new Chevrolet Avalanche for its former chairman.

It also spent $9,900 on televisions, including one with a 73-inch screen, and paid $33,500 to install a small gym and locker room at its office.

McCasland said the housing authority plans to sell its TVs, its unused gym equipment and most of its cars.